The European Commission has concluded that UK plans to grant certain tax relief to producers of video games are in line with EU state aid rules. The Commission has found in particular that the measure provides incentives to developers to produce games meeting certain cultural criteria, in line with EU objectives.

In April 2013, the Commission opened an in-depth investigation because it had doubts that the aid was necessary (see IP/13/333). There seemed to be no obvious market failure in this dynamic and growing sector and games were being produced even without state aid. The Commission also considered that limiting the expenditure qualifying for the tax relief to goods or services 'used or consumed' in the UK would be discriminatory. The UK and other interested parties were given the opportunity to comment.

Following an in-depth analysis of these comments and some amendments proposed by the UK, Commission Vice-President in charge of competition policy Joaquín Almunia concluded: "Our initial doubts have been dispelled. The proposed aid for video games is indeed focusing on a small number of distinctive, culturally British games which have increasing difficulties to find private financing."

The video games tax relief will provide an incentive to video game developers to produce games meeting certain cultural criteria. After the Commission opened an in-depth investigation, the UK removed the originally envisaged territorial spending obligations imposed on beneficiaries of the scheme. The UK demonstrated in particular that the proposed cultural test ensures that the aid supports only games that are of cultural value. Only around 25% of UK produced games would be eligible for aid. Without this support the number of new culturally British games is likely to decline considerably.

The Commission therefore concluded that the measure promotes culture without unduly distorting competition in the Single Market. It is therefore in line with Article 107(3)(d) of the Treaty on the functioning of the European Union (TFEU).

Background

In December 2007, the Commission had already approved aid to video games in France, also following an in-depth investigation (see IP/07/1908).

Article 107(3)(d) TFEU provides that aid to promote culture and heritage conservation can be compatible with the Single Market where such aid does not affect trading conditions and competition in the EU to an extent that is contrary to the common interest.